Thank her politely for her willingness to set the situation right.
Tell her that you will end the dispute promptly once the full refund is in your Paypal account.
If she asks for the end before refunding, repeat that you will end the dispute promptly once the full refund is in your Paypal account.
If she cannot prove delivery of your item, Paypal will refund you, and go after her for the money. This will also lead to black marks on her selling account, which may restrict her ability to list and sell.
Don't worry too much about her wording. English is probably not her first language. 'Free Shipping" is adtalk for 'We include our costs for shipping and packaging in the asking price of the item.'
Full Refund means there will not be a restocking charge and you will get back the entire amount you paid.
And then you will end the Dispute and leave appropriate feedback.